CFTC Staff Grants Temporary No-Action Relief to Persons Eligible for the Trade Option Exemption

The staff of the Division of Market Oversight issued a no-action letter providing that, for a limited time, market participants can rely on the trade option exemption in CFTC Regulation 32.3, which the CFTC had proposed to rescind, rather than complying with requirements relating to swaps. The relief is fairly limited in that there are very significant conditions to compliance with Regulation 32.3, including that the offeree be a "commercial" and that the option be physically settled. The no-action letter cites a variety of questions asked by the CFTC in its recent joint release with the SEC defining the term "swap." The no-action letter is effective until the earlier of December 31, 2012 or the date on which the CFTC says otherwise. For a general discussion of the definition of the term "swap," including issues as to commodity options, see "Lofchie's Guide to CPO/CTA Regulation, Chapter 2."

Cross-Reference(s): Dodd-Frank Act Sections 721, 722, 733; CFTC Rule 32.3(a), 32.3(b), 32.3(c), 32.3(d); CEA Sec. 1a(47)(A).

View in full here (links externally to CFTC website).Additional Materials: CFTC Press Release.